After the two-day meeting of the Federal Open Market Committee -- the Federal Reserve's rate-setting arm -- policy makers announced they will replace Operation Twist, which expires at the end of the year, with the purchase of longer-term Treasury securities initially at a pace of $45 billion a month. This would be in addition to its ongoing purchases of additional agency mortgage-backed securities at a pace of $40 billion a month.

Also, policymakers decided to keep the target range for the federal funds rate at an exceptionally low zero to 0.25% as long as the jobless rate remains above 6.5%, inflation expectations for the next one to two years stay subdued and longer-term inflation projections continue to be tame.

Prior to the announcement, major equity averages were trimming gains in late morning trading amid signs of discord in the U.S. fiscal cliff negotiations.

House Speaker John Boehner on Wednesday criticized President Barack Obama's most recent budget plans as unbalanced and focusing too much on tax rate hikes, according to The Wall Street Journal.

"His plan does not fulfill his promise to bring a balanced approach to solving this problem -- it's mainly tax hikes," said Boehner, according to the Journal. "His plan does not begin to solve our debt crisis, it actually increases spending."

Obama indicated Tuesday evening that he's optimistic a deal will be reached with congressional Republicans.

Obama has softened his stance on tax increases, lowering his counteroffer in tax revenue to $1.4 trillion over a decade from $1.6 trillion.

Breadth was positive, with winners outpacing losers 17 to 13. The top percentage blue-chip gainers were Hewlett-Packard (HPQ) , DuPont (DD) , American Express (AXP) and General Electric (GE) .

DuPont shares closed up 1.4% after the chemical company announced a $1 billion share buyback plan and boosted its full-year profit guidance to the high end of the previously estimated range.

Microsoft (MSFT) shares advanced 0.29%, as the company plans to increase the availability of the new Surface tablet at stores and to extend the operation of temporary retail stores for the holiday shopping season.